Bear's Portfolio at the end of May

Investment Analysis Clubs Saul’s Investing Discussions
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Another month has flown by, and another month I was very active…maybe too active…in “managing my portfolio.” I do truly think of it as managing, not trading. I don’t buy or short to make a quick profit and then close the position. That’s trading. I buy with the intention to hold good companies. It just seems like I may be changing my mind a little too much – something I’ll continue to monitor. I may need to enforce a longer time period for due diligence before I allow myself to buy stocks of new companies. We’ll see as the journey continues.

That said, my 3 large positions remain – although a 4th has joined the mix. In order, we have: SKX, LGIH, FIT, and SEDG.

I’m down to just 3 medium positions: PN, PERI, and XPO.

I’ve actually got 12 small positions now (up from 11), but they have changed considerably. I’ll discuss below. Current list is: SUNW, MITK, RUBI, DY, LC, INFN, INBK, STMP, AMZN, PAYC, CBM, GDEN.

I’ve got about 3.5% in cash.

If you did the math, I’m actually down from 21 positions to 19. Very happy with that. They’re also a little more spread out, with fewer medium positions and more small ones. The two biggest, esp SKX, have gotten REALLY big.

Previous Month Summaries

January: I didn’t start doing this until February
February: http://discussion.fool.com/bears-portfolio-at-the-end-of-februar…
March: http://discussion.fool.com/bears-portfolio-at-the-end-of-march-3…
April: http://discussion.fool.com/bears-portfolio-at-the-end-of-april-3…

May Performance

May was a difficult month, and largely because of quarterly reports. Many were exactly what I had hoped for or better, but did not please the markets. Hopefully I will eventually be proven right that these companies (I’m looking at you FIT) will continue to grow and become more and more valuable, which will eventually be reflected in the stock price. But for now, results are not good.

It’s not hard to see why my portfolio is down in May. All of my top 3 at the end of April are down (SKX, LGIH, and FIT), and several others are as well.

At the end of April I was down 4.56% for the year. After May I’m down 10.60%. I was down as much as 16% at my worst (May 19th).

The S&P was up 1.05% YTD at the end of April. After May it is up 2.6% on the year.

Changes this month, and why I made them

Here’s a quick rundown of stuff I sold out of:

TPLM - This was a speculative play, and they’re probably going bankrupt.
ERI - Took profits – not a company I really want to follow, and they seem expensive.
GBX - Stagnant – possible value bet, but too unclear. Kind of like AHGP, which I liquidated in April.
SSW - Not something I understand well or want to follow.
INVN - Tiny position that I never should have started. Haven’t even done much research on the company.
CYBR - Just seems so expensive…I don’t really understand it and it seems like a story stock.
SCMP - Really not in my wheelhouse. It was a try out position and I just didn’t get into it.
HRTG - We discussed at length on the board and decided they have a really risky niche.
SWKS - Just not for me. The company doesn’t seem to expect a lot of growth any time soon. Maybe that’s a good thing – if the expectations change favorably (say on their next quarterly CC), the stock could be in for a jolt upward. I just don’t know.

Here are the new companies I’ve added:

SUNW - I’m excited by alternative energy. This company is dirt cheap and growing like a weed. Lots of risk/volatility as it is TINY!
MITK - One of Saul’s. I didn’t get in until $8/share or so, and it’s not cheap, but what a great niche. I just couldn’t resist any longer.
RUBI - Saul introduced this and I must say it sounds like a great opportunity.
STMP - Growing like a weed and very cheap (because of a SA short attack, methinks)
AMZN - Well it’s time for everyone to say a big “I told you so” to me. I do really have to ignore my bias toward smaller stuff in regards to this one…but I have finally stopped lumping it in with the likes of NFLX. The growth is just phenomenal, and they may be at a sort of inflection point where they stop looking so expensive.
PAYC - Sort of trying this one out. One of a few I’ve been looking at, and pulled the trigger.
CBM - Don’t really get this one, but like RUBI, they seem to be sandbagging a bit on guidance, which probably bodes well for future beats.

Adds/trims:

I’ve added to SKX and LGIH as these continue to be my two highest conviction positions. It doesn’t hurt that they are two of Saul’s top 3 as well. They grow every quarter, and the stocks have remained so inexpensive. Just opportunities I want to load up on.

I trimmed INFN. I hated to sell at the low, but wanted to buy other things. Plus, they really do need to show some earnings eventually.

I also trimmed FIT (after initially adding to it after earnings). It’s still very cheap and will remain a large position for me, but there are risks and I anticipate volatility. Just being cautious.

SEDG got clobbered after earnings, which were exactly what I expected, and the outlook is good, although clearly not as perfect as the market wanted. Here’s the thing: this isn’t a stock that’s priced for perfection. Even after it’s recovered quite a bit, the PE is below 15!

I trimmed INBK because I really don’t understand what’s going on. They increased share count by about 20% (which I guess was planned although I had missed it) and the stock went up. Seemed like a good place to take profits and reduce exposure.

I added back to PN when shares hit $7.50 or so. I know there are a lot of risks but this is incredibly cheap. PE is ~9 or something.

I added to LC – it’s gotten destroyed because the ex-CEO did some shady stuff. I realize that it’s a big risk-ball right now and I’m still keeping my position small, but I did want to “be greedy when others are fearful.” Maybe this isn’t the place to do that, which is why I’m being cautious with my position size. Please note that this is probably my #1 most volatile position.

My Current Allocations


Skechers USA	       19.6%
LGI Homes	       13.8%
Fitbit	                8.4%
Solaredge	        8.4%
Patriot National	6.6%
Perion         	        4.5%
XPO Logistics	        4.1%
Sunworks	        3.2%
Mitek Systems	        3.2%
The Rubicon Project     3.1%
LendingClub	        3.0%
Dycom	                3.0%
Infinera	        2.7%
First Internet Bank	2.7%
[Stamps.com](http://Stamps.com)	        2.5%
Amazon	                2.5%
Paycom	                2.1%
Cambrex	                1.8%
Golden Entertainment	1.3%
CASH	                3.5%

Random Thoughts and Conclusions

My random thought is that while SEDG getting destroyed after earnings was one of the big negatives for me this month, adding to it considerably while it was down and its subsequent comeback has been one of the biggest positives. Same with the comeback of the decimated INFN, though unfortunately I had trimmed it rather than added to it. Good reminder of just how short term the market can be. Those companies got beaten down for different reasons, but both it seems were beaten down too far. Since their lows, they are two of my best performers.

There are many lessons to take from this so I won’t try to draw a single conclusion.

I wish you all the best in June!

  • Bear
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Bear,

It takes guts to lay it all out there, and I bet you become a better investor over the long haul for doing it. I’m going to start doing this for myself on a monthly basis. My portfolio is quite a bit more boring than yours, but I don’t have the guts to lay it all out there anyway.

It just seems like I may be changing my mind a little too much – something I’ll continue to monitor.

I recall a guy we all know and love stating the biggest mistake he sees people make is not willing to change their mind in the face of evidence to the contrary of their thesis. That was in an interview I read today.

So, maybe changing your mind isn’t all that terrible, but striking a balance in your situation may be warranted. And you gave a great solution…

I may need to enforce a longer time period for due diligence before I allow myself to buy stocks of new companies.

Another way to look at this would be to start with smaller positions and build as you get to know the company. However, you would need to decide what do to with the rest of the portfolio while building. Is it in cash, higher convictions stocks, etc???

Anyway, thanks for sharing.

Take care,
A.J.

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Thanks, AJ. I appreciate it.

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Great write-up Bear, thanks for your summary of your month.

Saul

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Thanks, Saul. Enjoyed yours as well, as always!

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Hey, aren’t you the guy who had a lot of Twitter earlier this year?

Question – are you keeping an investing journal with details about why you are buying and selling each position?

I would be careful about monitoring your turnover. If you are hopping in and out of stocks every month, make sure you know why you are making the moves and you are not trading for trading’s sake, or boredom, or any other reason.

Have fun with it,

Karen

Ticker Guide: AMTD / PZZA • See my holdings here: http://my.fool.com/profile/CMF_KBecks/info.aspx

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Thanks, Karen. I guess you could say these monthly posts I’m doing are an investing journal of sorts. I sold out of Twitter in April after their Q1 report, and wrote about it here: http://discussion.fool.com/bears-portfolio-at-the-end-of-april-3…

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I don’t like being the bad guy, but you are currently losing big time to the S&P.

How did that happen, and what are you learning from it?

In terms of an investing journal, I’m thinking that you need to be more detailed. I’ll admit that I have tried an investing journal and I kind of suck at keeping it up, but I do try to be very careful about making actions and I spend a fair amount of time reflecting on what’s working and what’s not working in my portfolio. I should write these down, because learning is valuable, if you take the time to develop a set of best practices for your investments.

For example, I’ve gotten burned twice by putting risky investments in the wrong part of my portfolio. They were in IRAS, they should have been in taxable so when they failed I could have a write off, and not kill money in my tax-deferred accounts (where contributions are limited). Just today I was reviewing my portfolio and I worked to make a correction of a position that was in tax-deferred and it is a riskier investment. I closed at a slim profit and I may move it into a taxable account later. First I will ponder it.

How are you monitoring your companies’ progress? Are you listening to each of their conference calls? (that takes a lot of time. Saul says he reads transcripts and that is smart.) I have only listened to 3 conference calls in my tenure so far, but I primarily use a Fool portfolio service were I don’t pick most of my own companies. I only have 3 of my own choices right now, because I prefer to be in the company of expert investors and I’m smart enough to know what I don’t know.

You’re getting a lot of action but you aren’t getting your desired result yet. Be careful out there. What is your firm plan for turning things around and what have you learned, what are you doing differently now, or are you just picking other things that sound good now?

Best wishes,
Karen

Ticker Guide: AMTD /PZZA • See my holdings here: http://my.fool.com/profile/CMF_KBecks/info.aspx

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Hi, Karen, aka bad guy, aka mean lady.

you are currently losing big time to the S&P.

How did that happen, and what are you learning from it?

I tackled this question in the “May Performance” section:

May was a difficult month, and largely because of quarterly reports. Many were exactly what I had hoped for or better, but did not please the markets. Hopefully I will eventually be proven right that these companies (I’m looking at you FIT) will continue to grow and become more and more valuable, which will eventually be reflected in the stock price. But for now, results are not good.

It’s not hard to see why my portfolio is down in May. All of my top 3 at the end of April are down (SKX, LGIH, and FIT), and several others are as well.

How are you monitoring your companies’ progress? Are you listening to each of their conference calls?

As I said I do read and/or listen to the calls. I also keep up with news, press releases, etc. I read any articles I can find on TMF and SA.

As far as the plan going forward, it’s to put the most money where my conviction is the highest. Not much new there.

What about you, Karen? Do you compare your results to the S&P? If so, what have you learned? And what has helped you get better at picking companies to invest in?

Thanks,

Bear

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Hi Bear,

My family is down slightly for the year so far, 0.6%. So I am also behind the S&P 500 and I’m not thrilled with that. A few things are helping to take the sting away:

  1. Most of the companies I own pay dividends, netting just about 1% dividend yield, not much but it doesn’t hurt. Some dividends are reinvested.

  2. I am doing some option writing this year to try to make some additional small gains. I am trying out some covered calls in addition to put writing.

  3. Understanding that bad markets happen from time to time. Stocks go up, stocks go down. I’m trying to learn to live in this environment, but my goal is to make positive returns on every 3-year cycle.

  4. A reasonable savings rate and modest household budget. Just makes me feel better.

Some of my recent moves are:
– re buying into a company that I had earlier written off. Doh.
– selling two companies that I thought I could live with but were making me uncomfortable for important reasons - leadership and debt. I decided to swap these for companies that are vetted by the Fool and that I’m more comfortable with.
– selling options for a smidge of income here and there
– I’m keeping a watch list but I’m very hesitant to pull the trigger on anything.

Another big lesson is that I should have bought more in Jan/Feb. Doh! Doh!

I’m not a great stock picker, don’t claim to be one so I rely on lot of help. A LOT of help. I may not always agree with advice 100% but I try to listen very carefully and ask lots of questions and I’m not afraid to ask for help on issues I’m struggling with. I try to find the best teachers I can.

I primarily follow Motley Fool Pro, a great service. I like to read Saul’s board and have one of his stocks in my port right now. This is a fun place to read up, but I’m very slow to make moves. There’s one here I’m interested in but I’m gong to watch it more.

I am also learning to be patient with having a variety of stocks in different sectors, because when some slow, others grow. I’m trying to be more observant of this and feel less reluctant about slower stocks that ballast the port.

Hope that helps, and best of luck with it.
Karen
Ticker Guide: AMTD/PZZA • See my holdings here: http://my.fool.com/profile/CMF_KBecks/info.aspx

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P.S. I’m not mean, I’m truthful. It’s a real pain to try to get back to even after losses, and it’s important to really look at what’s working and what’s not.

I don’t read Saul’s board in detail so I don’t know how much work you have put in to developing your thesis for each stock in your portfolio – why is each stock going to succeed? How is each stock going to deliver results and improve their business? Go deep with these.

When I was a newer investor I bought a lot of stuff that sounded good, but sounding good is easy. Delivering return is not easy.

It’s good that the time horizon is long. There’s time to work out investing style and to afford a few wrinkles in the plans.

Good luck!
Karen
Ticker Guide: AMTD / PZZA • See my holdings here: http://my.fool.com/profile/CMF_KBecks/info.aspx

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P.P.S. Is this a speculative account for you or is it money you plan to count on in the future?

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It’s good that the time horizon is long. There’s time to work out investing style and to afford a few wrinkles in the plans.

P.P.S. Is this a speculative account for you or is it money you plan to count on in the future?

Very much agree. My portfolio is just 2 accounts: my 401k and a smaller taxable account. Speaking of taxable accounts (and this question is for anyone), do you have to enter each buy or sell on your tax return? That’s what I’ve had to do the past few years. But especially with adds and trims, I am making a lot more buys and sells now, so I could see this becoming annoying.

2) I am doing some option writing this year to try to make some additional small gains. I am trying out some covered calls in addition to put writing.

I have sold a few puts in the past, and at the very least you get a better price on whatever you’re buying. I just didn’t like missing out on the upside. If I want to buy something, it’s usually b/c I see double/triple/etc opportunity, not because I want to make 5% in 6 months or 10% in a year.

Another big lesson is that I should have bought more in Jan/Feb. Doh! Doh!

I assume this lesson is tongue in cheek, as it’s impossible, of course, to time the market. But I hope you bought at least a little on the dip! I’m close to 100% invested, so I don’t really get that chance much. Although I have been known to drain a savings account and deposit it into my brokerage account, or increase my 401k contribution, in bear markets.

I’m not a great stock picker, don’t claim to be one so I rely on lot of help. A LOT of help.

This really stood out to me. You don’t believe you’re a great stock picker, but you believe with help you can beat the S&P? Am I getting that right? Or are you just now trying to learn to pick stocks? I guess that’s where I am. I’m 36, so I have a long investing horizon. If after a couple years I am still getting crushed by the S&P, maybe I chalk this whole experiment up to learning, buy an index fund, and get a new hobby.

How long have you been investing in individual companies? What kind of fraction of your total investments do you invest in individual companies? How have your returns been in previous years?

Bear

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Speaking of taxable accounts (and this question is for anyone), do you have to enter each buy or sell on your tax return?

There should be a page you can pull up on your online brokerage account that you can isolate to the prior year closed positions. Print that and then the totals go on the IRS form -short and long term- and you attach a copy of the individual trades.

JT
not a CPA, but my nephew does a good job for me, much easier.

Future Simplified 1040 Form:

How much money did you make in 2030? $________

Send it to the U.S. Treasury

:wink:

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Hey Bear - just my 2 cents and IMHO:

“Very much agree. My portfolio is just 2 accounts: my 401k and a smaller taxable account. Speaking of taxable accounts (and this question is for anyone), do you have to enter each buy or sell on your tax return? That’s what I’ve had to do the past few years. But especially with adds and trims, I am making a lot more buys and sells now, so I could see this becoming annoying.”

  1. I am not sure why you would be trading in your 401k? Especially when you say you look for companies with 2x or 3x gains. That’s a tough recipe.

  2. On taxes, you do have to report each buy and sell; and obviously keep track of when you first bought it and average share price. Good news is that, depending on your broker/tax software, it’s all done for you. As example, I use Fidelity and Turbo Tax. And with Fidelity, I can check on gain/loss in December to make decisions based on gains/losses.

Sox

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Bear

“Speaking of taxable accounts (and this question is for anyone), do you have to enter each buy or sell on your tax return? That’s what I’ve had to do the past few years. But especially with adds and trims, I am making a lot more buys and sells now, so I could see this becoming annoying.”

The answer is yes. You need to have:

  1. Buy Date
  2. Buy amount (net of purchase amount - expenses)
  3. Sell Date
  4. Sell amount (net of sale amount - expenses)

Most brokers have downloads to software like TurboTax, etc.

All brokers should issue a 1099, normally a consolidated form that combines all needed info for the year.

A lot of sales in a taxable account produces additional drag on your returns in particular if they are short-term.

If you have the ability, you might consider getting cash into a Roth, directly if you are eligible or or by making a non-deductible contribution to a traditional IRA followed by a Roth conversion.

We have 1 taxable brokerage account and 4 IRA brokerage accounts, two trad and two Roth. 99% of trading is in the IRA’s.

Something to think about …

On the S&P thing: Comparing a tight portfolio to an index can be a difficult thing. You will invariably have periods of under performance. That is the nature of the beast.

My stats as of 12:47 CDT:
Fri 6/3/2016 Chng: - 0.13%
_Portfolio vs High: - 1.46% (12/2/15)
_YTD Portfolio: 4.43%
_YTD DJI30: 2.07%
_YTD NASDAQ: -1.35%
_YTD SP500: 2.61%
_XIRR since 2005: 20.07%

It will change. It is 46 stocks and 10 ETF’s. If I were to add the withdrawals since our 12/5/15 high, we would be at an all time high again. Have a look at my profile link below. I update it afetr close each night and sometimes on Saturday after interest and dividends are posted.

Remember, when you have a 50% up year, I won’t. I am fine with that. You need to keep your conviction alive. Continually changing horses is often how people lose money.

Gene
All holdings and some stats on my profile page
http://my.fool.com/profile/gdett2/info.aspx

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Hi Bear,

• If the taxes are confusing, get help from a CPA, they are worth it.

• I have a sub to Motley Fool options where I have been learning over the past three years. The options are mostly small gains. However, I had a couple long calls (one was Facebook) that totally rocked. They could have also gone to zero, but those recommendations from the service were very very successful. I only use options sparingly, like the sprinkles on the sundae.

• I was scared in Feb. That is OK. I didn’t sell stuff, I just sat. I bought a tiny teeny but but not much. In retrospect it might have been good to venture a little more.

• Yes, I am not a great stock picker. I started picking stocks in 1999. Then I got married and then we started a family and I pretty much checked out of stocks. Came back to the fool in summer 2013 and decided to join up the services. Found a good home at Pro where I like the recommendations and the advisors have a solid track record I can follow along with. I don’t index because I believe that I need to pay attention to what is going on in the markets and I’d like to try to do better than average for my family.

• I hate to tell you but 36 isn’t that young! I’m 46, it goes by fast. Aches and pains! If you were 22 and experimenting with high risk stocks with money from from your summer job, then I wouldn’t worry about you as much.

• Our returns as far as I can tell are meager but positive, around 6%. About 60% of our investment money is in individual stocks, and the rest is in fund-type stuff. I feel like it took us a long time to earn it, I want to be very careful to protect it, and grow it.

Hope that helps,
Karen

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Our returns as far as I can tell are meager but positive, around 6%.

Is that total? That’s losing to the S&P by quite a bit, right? Do you feel like you’re getting the hang of it and will get better? If not, wouldn’t an index fund give you better returns?

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If you have the ability, you might consider getting cash into a Roth, directly if you are eligible or or by making a non-deductible contribution to a traditional IRA followed by a Roth conversion.

This may be a little optimistic, but I don’t plan to work until I’m 59. Hence, I’ve started investing a little in a taxable account. I do tend to do more buys and sells in the 401k so I don’t have to worry about the tax implications.

Are there any advantages to an IRA (roth or not) over a 401k especially in regard to early retirement? I’ve always seen them as somewhat interchangeable.

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“Are there any advantages to an IRA (roth or not) over a 401k especially in regard to early retirement? I’ve always seen them as somewhat interchangeable.”

The biggest liability of most 401(k)s is the limited investment choices.
Many times the mutual funds available are house funds. If you think you can beat most funds, a self directed IRA of either type would give you a much broader choice of stocks and other investment vehicles.

Rob